Discretionary spending rises for third straight month: ABS
Household spending rose 0.4 per cent in December on a seasonally adjusted basis, fuelled by higher spending on discretionary goods and services.
Spending rose for the third month in a row in December 2024, following a 0.8 per cent rise in November and a 1.0 per cent rise in October, Australian Bureau of Statistics (ABS) data showed.
Five of the nine spending categories tracked by ABS saw up-ticks, with the largest boosts recorded in transport (1.1 per cent), clothing (1 per cent) and miscellaneous goods and services (1.6 per cent).
“Household spending on discretionary goods and services rose 0.6 per cent, which was the third straight monthly rise,” Robert Ewing, ABS head of business statistics, said.
According to the ABS, the rise in discretionary spending was driven by consumers splashing out more on catering services, air and sea transport, vehicle purchases and clothing.
“Continued strength in clothing and footwear, furnishings and household equipment, and goods for recreation and culture also contributed to higher discretionary spending,” Ewing said.
End-of-year sales events such as Cyber Monday, which fell in December this year, also drove the uptick in discretionary consumer purchases.
“Consumers have capitalised on the end-of-year sales season, driving a sustained rise in spending to finish 2024,” Ewing added.
Spending in the December 2024 quarter was 1.4 per cent higher than the December 2023 quarter, adjusted for inflation.
Despite the boost in discretionary spending, consumers had a gloomy mood in the final quarter of 2024 according to NAB’s consumer sentiment survey. NAB’s consumer stress index rose last quarter, reflecting growing concerns over government policy uncertainty related to the upcoming election.
Cost-of-living concerns weighed on consumers as their primary source of stress throughout late 2024, despite fewer survey respondents observing higher prices.
Higher discretionary spending signals more good news for the economy, following last week’s promising CPI statistics which indicated that inflation could return to the RBA’s 2–3 per cent target bands as early as the first quarter of 2025.
“These results feel like a turning point for the Australian economy and a rate cut now seems more likely to occur in the first half of this year,” Luke Fossett, general manager at GoCardless Australia and New Zealand, said regarding last week’s inflation data.
“When consumers catch a break, that means more discretionary spending, so businesses catch a break too.”
